A short sale happens when the seller owes more on the property than it is worth, is not able to pay what that owe, receive an offer to sell the property, and the bank agrees to accept LESS than a full payoff of the amount owed. Sounds fairly simple.....however it is not. The seller must show a genuine financial hardship for a Short Sale to happen and this can take time.
Banks are finally starting to understand that they lose less money by reaching out to hardship situation and doing a short sales than when they go through the entire foreclosure process. Now they have a real reason to increase their ability to process and accept a short sales. The sale price will be close to the current market value of the property, it is a great deal but not the steal some people have been thinking about. The amount owed by the seller is not the issue that will make or break a short sale. The issue is that the property is worth less than what is owed, and that the seller is having personal conditions which make it appear that they will not be able to pay over time, this creates the short sale.
These are the two basics of being a short sale candiadate. The reason you hear about so many short sales failing is that there has become this belief out there that anyone can qualify for a short sale, it is simply not true. If being upside down in a property was the only qualification needed to be a short sale candiate, most people who purchased a home from 2002 - 2010 would be candidates for a short sale.
Short sale should be looked at as an attempt to avoid forclosuer if that what you see on the horizon.